Two former Capital+Merchant directors have pleaded not guilty to criminal charges in the High Court at Auckland this morning.

Former directors Neal Medhurst Nicholls and Wayne Leslie Douglas face three criminal charges for theft by a person in a special relationship and the publishing of false statements. Some of the charges carry a maximum penalty of 10 years' jail.

The pair's case concerns allegedly related-party loans of about $14.5 million made to three companies that converted two run-down Palmerston North office blocks into student accommodation, a project called "the Hub".

The pair allegedly stood to benefit from these related-party loans but failed to disclose them in a Capital+Merchant prospectus and knew they breached the company's trust deed.

Capital+Merchant went into receivership in November 2007 owing $167 million to around 7500 investors.

The proceedings, brought by the Serious Fraud Office, are being heard by Justice Ed Wylie without a jury and are expected to take about two and a half weeks.

Prosecutor Nick Williams will spearhead the Crown case. The duo's defence team includes Bruce Gray QC.